Value Added Tax (KDV — Katma Değer Vergisi) is one of the most important indirect taxes foreign companies must understand when operating in Turkey. With three distinct VAT rates and various exemptions, navigating VAT compliance requires professional guidance. This guide covers everything you need to know about Turkey’s VAT system for 2026.
VAT Rates in Turkey 2026
Turkey applies three VAT rates, depending on the type of goods or services:
- 20% (Standard Rate): Applies to most goods and services including electronics, consulting, accommodation, transportation, professional services, and general merchandise
- 10% (Reduced Rate): Applies to textiles, clothing, footwear, furniture, household goods, certain food and beverage services, and special medicinal products
- 1% (Super-Reduced Rate): Applies to essential foodstuffs (bread, flour, legumes), certain agricultural products, and specific real estate transactions
VAT Registration Requirements
All companies conducting commercial activities in Turkey must register for VAT from their first day of operations. There is no minimum turnover threshold — registration is mandatory regardless of revenue. Foreign companies establishing a presence in Turkey through a subsidiary, branch office, or permanent establishment are required to collect and remit VAT on their Turkish-source transactions.
VAT Return Filing and Payment
VAT returns in Turkey are filed monthly, by the 28th day of the following month. Payments are due on the 28th day as well. Companies with no transactions in a given month must still file a nil return.
Key filing requirements:
- Monthly KDV-1 return (standard) or KDV-2 return (reverse charge)
- Filed electronically through the Interactive Tax Office (İnteraktif Vergi Dairesi)
- Supporting BA/BS forms (purchases/sales reports) filed for transactions exceeding 5,000 TL
- E-invoice (e-fatura) and e-ledger (e-defter) mandatory for most companies
VAT Exemptions and Zero-Rating
Several important VAT exemptions and zero-ratings apply in Turkey:
- Exports: All goods and services exported from Turkey are zero-rated (0% VAT), allowing full input VAT recovery
- International transportation: Zero-rated for both goods and passenger transport
- Free Trade Zones: Deliveries within Free Trade Zones are exempt from VAT
- Technology Development Zones (Teknokent): Software deliveries and R&D services produced in Teknokent zones are exempt
- Diplomatic exemptions: Supplies to diplomatic missions and international organizations
- Financial services: Banking, insurance, and certain financial leasing services
Input VAT Recovery
Companies can deduct input VAT paid on purchases from their output VAT liability. If input VAT exceeds output VAT, the excess amount can be carried forward to future periods. Direct cash refunds are available in specific cases:
- Export-related input VAT (directly refundable)
- Transactions subject to reduced VAT rates (refundable above TRY 164,000 threshold for 2026)
- Investment incentive certificate holders
- Diplomatic VAT refunds
Reverse Charge Mechanism
Turkey applies a reverse charge mechanism (sorumlu sıfatıyla KDV) for services received from non-resident companies. When a Turkish company purchases services from a foreign entity without a Turkish tax registration, the Turkish buyer must calculate, declare, and pay the VAT on behalf of the foreign supplier using the KDV-2 return form.
E-Invoice and E-Ledger Requirements
Turkey has been a pioneer in electronic tax documentation. As of 2026, e-invoice (e-fatura) and e-ledger (e-defter) are mandatory for companies that exceed annual gross revenue thresholds. Companies that issue e-invoices must also receive e-invoices from registered senders. For B2C transactions, e-archive invoices are used. All electronic documents must be stored for 5 years.
Common VAT Compliance Mistakes
- Failing to file nil returns in months with no activity
- Not applying the reverse charge mechanism on imported services
- Incorrect VAT rate application across different product categories
- Late filing penalties (tax loss penalty of up to 50% of underpaid VAT)
- Not maintaining proper documentation for input VAT deductions
How Celikel CPA Helps with VAT Compliance
At Celikel CPA, we manage the full VAT compliance cycle for foreign companies in Turkey. Our services include monthly VAT return preparation and filing, input VAT recovery optimization, e-invoice and e-ledger setup and management, VAT refund applications for exporters, and advisory on cross-border VAT implications.
Need help with VAT compliance? Contact us: yigit@celikelcpa.com | WhatsApp: +90 544 649 40 87
